Health Care Costs and Bankruptcy

That is truly a great article I read it back when it was first published and it opened my mind to some things. I like the idea of event-based insurance but because the incentive to fraud is big I think that it would have to evolve slowly. (BTW in my life I have known many people who fraudulently collected SS disability and workman’s comp. Fraud seems rampant in those programs.)

Also, I have read that “medical bankruptcy” is a problem in some countries that have socialized medicine. It seems that nothing substitutes well for prudence and good family relations.

I would love hear from supporters of socialized medicine how much of own wealth people should be required to spend to care pay for their medical bills before the state kicks in.

My compromise plan would be:

My compromise plan:

The state would provide insurance to all Americans but the annual deductible would be equal to the family’s trailing year adjusted income minus the poverty line income (say $25,000 for a family of 4) + $300. So a family of 4 with a trailing year adjusted income of $30,000 would have a deductible of $5,300. A family of 4 with a trailing year adjusted income of $80,000 would have a deductible of $55,300.

We expect some people live at the poverty level, should we expect formerly middle class people to live at the poverty level after an illness?

Has anyone looked at what John Goodman, Linda Goodman, Devon Herrick & Robert Sade wrote about medical costs and bankruptcy? (OK, maybe only one of them wrote this small section.) It’s published by the National Center for Policy Analysis.

The first reference [54] is to the Himmelstein et al study in Health Affairs, which Arnold references in the TCS Daily article.

Here’s the relevant section:

A study claiming that more than half of all bankruptcies are caused by medical debt [54] is often cited, but the claim conflicts with four decades of economic research. The label “medical bankruptcy” was applied if out-of-pocket medical bills exceeded $1,000, even though out-of-pocket expenses of the average US household were $2,182 in the year studied.[55] Recalculating the study’s data, Dranove and Millenson conclude that only 17% of the sample “had medical expenditure bankruptcies.” [56] Well-designed economic studies have found no statistical link between bankruptcies and health problems.[57] In fact, household consumption is largely unchanged even in the face of very large medical bills.[58]

Source, with references to footnotes above:
http://www.ncpa.org/pub/health-care-reform-do-other-countries-have-the-answers

Thanks for posting the TCS article, Arnold. I’ll surely take a closer look.

The link to your piece on event based insurance isn’t working. Is there another way to access it?

@Brian S. great info, so the executive summary really should say ” Medical cost where a contribution factor to almost half of all bankruptcies .”

So I still disagree with Dranove and Millenson classification based on the U.S. average. The classification Medical bankruptcies should be based on a given % of a person income which I would put into the 20% to 25% range (an alternative would be to use multiplier of 4 or 5 as I explain below).

They should also add a contributing factor class based on the average % of out-of-pocket medical expenses a family spends in their given CPI region. It should then be further broken down to indicate how much it contributed to the bankruptcy. This should be based on multipliers of the % of income. (<2x the average % = minor factor, over 2x medium factor, ect).

I think that information would give some useful information for policy purposes and how to design effective new types of insurance. Although I do not know how to take into consideration Net worth.